Reply #30: Are you in CA? [View All]

[hughee99]

Why are California Gasoline Prices more Variable Than others?

http://www.eia.doe.gov/bookshelf/brochures/gasolinepricesprimer/

California prices are higher and more variable than prices in other States because there are relatively few supply sources of its unique blend of gasoline outside the State. The State of California’s reformulated gasoline program is more stringent than the Federal government’s. In addition to the higher cost of this cleaner fuel, there is a State sales tax of 7.25 percent on top of an 18.4 cent-per-gallon Federal excise tax and an 18.0 cent-per-gallon State excise tax.

California refineries need to be running near full capacity to meet the State’s gasoline demand. If more than one of its refineries experiences operating problems at the same time, California’s gasoline supply may become very tight and prices can soar. Even when supplies can be obtained from some Gulf Coast and foreign refineries, they can take a relatively long time to arrive due to California’s substantial distance from those sources. The farther away the necessary relief supplies are, the higher and longer the price spike will be.

California was one of the first States to ban the gasoline oxygenate additive methyl tertiary butyl ether (MTBE) after it was detected in ground water. Ethanol, a non-petroleum product usually made from corn, is being used in place of MTBE. Gasoline with ethanol requires changes in the way gasoline is produced and distributed. Some supply dislocations and price surges occurred in the summer of 2003 as the State moved to ethanol and away from MTBE. Similar problems have also occurred as a result of other fuel transitions.